PPI Claims Boost UK Economy

With PPI claim pay-outs averaging nearly £3000, it comes as little surprise that the UK economy is actually being boosted by PPI repayments

The banks have set aside around £10 billion to cover the cost of repaying people who paid for PPI when they didn’t want, need or ask for it. This incredible figure shows how serious the scandal has become. Mis-sold payment protection insurance is one of the biggest consumer financial news stories in recent times. As this huge stockpile of money returns to those who deserve it, financial experts have compared the mass reimbursement to a tax cut, while government initiatives have been unsuccessful.

The National Institute of Economic and Social Research have gone on to say that if this £10 billion figure is repaid in 2012, it could boost the UK’s economy by as much as 0.1%. Other experts suggest GDP could even be increased by 0.7%. This is encouraging news considering the economy shrank by the same amount in the months leading up to June.

During a time of recession, a windfall of £3000 is a huge bonus to the majority of bank balances. With fewer and fewer people having money to spare, this kind of cash injection has a big impact. While £3000 is the average amount reclaimed, there are many who’ve managed to claim back ten times that amount, and there are plenty more people who don’t even know they’re entitled to anything.

Although some of those who receive their money back are saving it for the future, something which isn’t immediately beneficial to the country’s economy, many people are spending their money on such things as:

  • Holidays
  • Cars
  • Gadgets
  • Home improvements

This spending is great for businesses, which in turn help to boost the economy. The registration of new cars has been steadily increasing in the past six months, which has no doubt been helped by PPI windfalls. With people cutting down on non-essential spending, businesses who operate in those markets have previously been suffering. It seems that as people are not necessarily expecting to receive any extra money, they are more inclined to spend it.

While nearly £5 billion has been repaid to consumers already this year, it is estimated that another £5 billion has not yet been claimed. As the banks have set this money aside, it seems reasonable to assume that they’re expecting to have to pay out at some point. There are still a great many people in the UK that have not yet begun the process of claiming, or do not realise that they’re entitled to PPI repayment. Consumers are being encouraged to check their loans, credit and store cards to see if they are due a repayment.